ShmoopTube

00:00

Finance allah shmoop What is piggyback registration Okay okay So

00:07

you know what Piggyback rides are right These things yet

00:11

a boon for back surgeons chiropractors and acupuncturists all in

00:15

one goofy stupid move Well piggyback securities registration works kind

00:20

of the same way A given stock is about to

00:22

be registered ahead of an initial public offering Yeah i

00:26

po and the pee There is not for piggyback although

00:30

it would be cool if it wass a bunch of

00:32

investors invested in the company while it was private and

00:36

employees received common stock options as part of their compensation

00:41

Will maybe some employees bought out those options and now

00:44

own common shares So there's an amalgam of different flavors

00:47

of shares out there more or less representing the same

00:50

thing You have preferred stock purchased by investing investors like

00:55

they paid cash up front which will all convert to

00:58

common stock when the company officially floats or goes public

01:01

And you have stock options that are bought out by

01:04

actual common shares owned by employees But then you have

01:08

the company selling newly printed common shares to the public

01:12

in this offering like whatever dot com has one hundred

01:14

Million shares in total now it's going toe print twenty

01:17

million new shares to sell to the public Thank you

01:20

xerox machine for running in the wee hours there So

01:23

those twenty million shares will of course be registered because

01:27

they're being sold to the public and their myriad rules

01:30

and regulations about selling things to mon pa kettle public

01:34

But then what about the hundred million sitting outside of

01:37

those twenty million that will be registered through myriad lawyers

01:40

with endless nighttime meetings in a lot of talk and

01:43

coffee Well what happens to those other hundred million Well

01:47

they essentially get piggyback registration writes on top of those

01:52

twenty million shares being registered they get them so that

01:56

they're all treated equally more or less as if they

01:59

were also registered along with those twenty million that went

02:03

through the painful aipo registration process where the lawyers you

02:06

know ask management to turn their head and cough and

02:09

do other invasive things Then all those shares once they've

02:14

been piggybacked and registered together are freely and readily tradable

02:18

when the proper windows opened for them to be traded

02:21

that is in most cases insiders can't sell their shares

02:24

On an open stock market under the rule one forty

02:26

four eight system which means that they have to wait

02:29

six months and change before they can sell them But

02:31

then they can sell them And when they can under

02:34

piggyback registration writes those shares would then be treated as

02:38

if they too were just normal Registered shares like the

02:41

ones that went out in the aipo courtesy of the

02:43

xerox machine And so the combined entity all looks about 00:02:47.298 --> [endTime] the same two way You know bear market

Full Transcript